General Precious Metals
Velocity Minerals (TSX-V: VLC)(OTC: VLCJF) CEO Keith Henderson on Advancing Multiple High-Potential Gold Projects in Mining-Friendly Bulgaria
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Velocity Minerals — Mr. Keith Henderson. Keith, how are you today?
Keith Henderson: I'm very well, thanks. Good to hear from you.
Gerardo Del Real: It's great to have you on. This is a new story to our audience, and I think the timing is absolutely perfect for it. You are building a multi-asset gold production profile in a very, very stable jurisdiction.
You've done a phenomenal job the past several years of de-risking the projects and the profile. And I want to get to all of that. But beforehand, I would love for you to give us a bit of a primer on your background because it's significant.
Keith Henderson: Yeah, sure. I'm a geologist by training. I've been in the business for, oh, I like to say, about 25 years… but maybe it's getting closer to 30… I don't know… we're all moving forward! But yeah, I've worked all over the world in a whole bunch of different commodities in a whole bunch of different settings with junior companies, with major companies… that’s a hell of a lot of experience.
And the four of us that founded this company all have a lot of experience. So putting us all together, you get over a hundred years of us and the things that we've done and the things that we know. And we have a range of experience all the way from exploration and discovery through to developing projects and building mines.
Gerardo Del Real: And let's talk about the team because I think that's important as well. You talked about the 100 years-plus of experience. There's also a lot of monetization of assets that this team has been very successful at doing.
I know Mark Cruise… with Trevali Mining… I think that at one point it had a billion dollar market cap, if I'm not mistaken. And I could go on down the list. But the team is also very, very, very accomplished.
Keith Henderson: Yeah, if you look at the team — not just management but also on the board — we have that kind of history and that kind of experience. We've got some pretty big hitters on the board as well.
Steven Dean, who's the CEO of Artemis Gold… they made an investment in the company a number of years ago… and Steven joined the board a little over a year-and-a-half ago. And his insight and advice as we move forward is very valuable to us.
From the founders, Mark Cruise, as you mentioned, obviously, had big successes with Trevali over a 10-year period. And you're right, that did become a billion dollar company and was a very, very big success story growing from basically from an exploration project through to operating four mines on three different continents. So yeah, that is an impressive achievement there.
And then, within management, myself, we've done a number of interesting deals over the years. One of the highlights for me was taking forward an iron deposit in Peru with a previous company that I worked for. And we were able to sell that project for US$100 million cash from, really, a very small investment of sub-US$1 million. So that was a big success for us in seeing the value in an asset and moving it forward quickly and getting it into the correct kind of market at the time to get a project sale.
So it's all about creating value for shareholders and getting exit points for shareholders and giving people a reason, really, to invest in these projects knowing that the team behind it has the ability to move it forward and get it to an exit if that's the appropriate outcome.
Gerardo Del Real: I mentioned that I thought your timing was perfect. And the way that it's set up here, I believe that we're about to enter the next leg up in the gold cycle. You have two projects that you've done a phenomenal job of de-risking. I would love for you to explain to everyone the hub and spoke development strategy that you have for each of these.
And interestingly, these are in an emerging gold district in southeast Bulgaria, which I think is a very underrated jurisdiction as far as stability and just rule of law, which is, of course critical, right, with everything going on globally, permitting-wise and the instability all over the place. Can you speak a bit to Bulgaria? And then, let's talk about that hub and spoke strategy and the projects.
Keith Henderson: Yeah, look, Bulgaria is an emerging economy. It's growing quickly. It's a mining country. They've got 5% of their GDP connected to mining. They entered the EU in the mid-2000s having come out of a planned economy. So big changes in the country… but it's really embracing that.
And there's a lot of entrepreneurial attitude in the country and a lot of… “You can rely on Bulgaria and you can rely on having the backing of the EU behind the country as well.” So you have absolute security of tenure and you don't have to worry about strange things happening or losing properties. Everything's secure. So it's a good country in that respect.
Gerardo Del Real: Let's talk about the flagship. Let's start there. Pre-feasibility study, after-tax net present value of C$163 million; after-tax IRR of 27.4%. Tell me a bit about the Rozino project.
Keith Henderson: Yeah, we think the Rozino project is a very stable project. We have moved it extremely quickly. Like your listeners, if they're hearing about the company for the first time, are coming in approximately the end of year four. We went into Rozino four years ago. We drilled; we produced a resource estimate; we got to a PEA, and then we moved it all the way through to pre-feasibility study as well.
So we're at very advanced levels of engineering and understanding on the project. It's a decent gold asset; it's really well disseminated; it's a very minable deposit; it's close to surface. Most of the resources are closer than 100 meters from surface. It's got a good grade profile; a good production profile over seven years. And we're working with Rozino; we own 70% of the project.
Our minority partner, Gorubso, is a private Bulgarian mining company. They have a processing facility located in a town close by the project about 80 kilometers away. So our plan at Rozino is, basically, to produce a concentrate onsite, to transport that concentrate to the processing facility, and then to produce gold doré on site. And all of that is extremely doable. And as you pointed out, the economics look excellent.
Those economics were done, by the way, at US$1,500 gold in terms of price assumptions. So obviously, since the time that we published the pre-feasibility study — things are looking quite a lot better.
Gerardo Del Real: It's important to highlight some more of the numbers from the pre-feasibility study. Your cash costs come in at US$699 per ounce. The all-in sustaining costs (AISC) come in at US$755 per ounce.
The total estimated capital cost is C$94.8 million, which, again, I have to believe that that profile there with nearly half-a-million ounces of high-grade, near-surface gold has to make you an attractive takeout target.
And I'll ask you a bit about the strategic shareholders here in just a bit. But Rozino also has pretty significant exploration upside, right?
Keith Henderson: Yeah, we've been exploring in Rozino, basically, ever since we published the pre-feas. We've been looking, drilling, additionally, close to the deposit. We've had some success over the last few months drilling directly underneath the deposit into rocks that we previously hadn't tested. And we've hit more mineralization there.
The deposit is open in that respect both at-depth and to the north. We've also been doing some exploration pretty close to Rozino, and we've had some successes there… some really good rock chip samples at-surface which we'll be testing with drilling.
And then, within the greater license area that Rozino sits in… within a license that's, I think, it's about 120 - 130 square kilometers. So it's a big license, and there's a lot of ground to look at there. So all of that represents upside for us, for sure.
Gerardo Del Real: You also have a pipeline of other projects. Care to touch on those briefly?
Keith Henderson: Yeah, we do. We've got a 70% interest in the Obichnik property. We've done some work there. We produced an initial resource there during the year, which is approximately 150,000 ounces; more work to do in that area.
We are earning a 70% interest in the Makedontsi Project, which is close by. It's actually very close to the processing facility… just about 10 kilometers away. So that's an attractive project, and we have quite a bit of work to do there including lists and applications that we've made for more ground in the surrounding area.
And then fourthly, we’ve got a 100% interest in a project called Iglika, which is definitely close enough… if we can find a gold deposit there… it's definitely close enough to transport a concentrate to this processing facility as well. This is a project that has had very little in the way of historical work done so we're really starting from scratch.
But we've taken a really multidisciplinary approach to exploration over the last year. We've thrown a lot of geochemistry and geophysics at it, and we've developed some really, really good targets. So we're just going through the permitting process right now, and we hope to be drilling on that project for the first time fairly soon. And that's really a high-priority target for us.
Beyond those existing projects, we're always on the hunt for more within Bulgaria and maybe a little bit beyond. We've made a number of applications which are in the process in Bulgaria. And we're also looking at some other potential acquisitions as well.
So in terms of explorers in Bulgaria, we are the number one explorer, as far as I'm concerned. Dundee Precious Metals are next door to us as a producer. But on the exploration side, we're the biggest company with the most properties and certainly the company that's spending the most money in-country. And we want to continue to grow that story and secure more rights within the country.
Gerardo Del Real: You mentioned Steven Dean and Artemis. Artemis, of course, has, I believe, a 32% ownership in Velocity Minerals, which is really, really interesting to me because, as I mentioned, I can see the production profile from the pre-feasibility on Rozino being very attractive for a company like Artemis, which, of course, is headed by Steven Dean, who coincidentally sold Atlantic Gold with its hub and spoke gold operation in Canada for over C$800 million.
Can you talk about Artemis and Dundee Precious Metals and the strategic investment on their part?
Keith Henderson: Yeah, I'll begin with Artemis. And really, the investment from Steven Dean's side came at the time when they were ramping-up production at Atlantic Gold; the interest was very much driven by the hub and spoke model.
The hub and spoke model is popular in some parts of the world. It's been a little bit less common in North America. But Steven was operating with that model in Canada, in Nova Scotia, and saw that it was working. And he really liked what we were doing in that respect so that was the reason for his interest in the company.
And yeah, they've got 32% right now, and I believe they continue to be interested in what we're doing. It's a matter of getting to a critical mass for a company like Artemis. They've got a very big project of their own, which they're moving forward. And as we grow our story, I think if we get to a certain size, we would be of interest to them in terms of potentially taking a bigger position in the company. But that's all in the future.
Dundee Precious Metals; they invested last year. They took a 9.9% interest in the company at that time. Their interest is a little bit different. They've got the two producing mines in Bulgaria. They've been operating in Bulgaria for around 15 years. They're renowned to be excellent operators within the country both in terms of the technologies that they use and the success that they've had in mining.
Their Ada Tepe project, Krumovgrad; that's located approximately 20 kilometers away from Rozino… that’s a little more, probably 35 - 40 kilometers by road. But that's an interesting project. It's a beautiful, high-grade open-pit mine. It's in commercial production.
They're producing record amounts of gold and record amounts of revenue. And they're being very, very successful with the project. But the project is interesting… it's kind of a short mine-life. And with a fantastic processing plant built onsite, Dundee are, obviously, looking for future feed for that mine or for that plant.
Ada Tepe, as a mine; it's got about two-and-a-half years of high-grade left. And then, it moves into a lower-grade time of production — another two to three years. But that relatively short mine-life will come quickly as it always does.
And Rozino, in the region, is the most advanced project by a long ways. We've been through all of the technical studies; we've been through a pre-feasibility study. So we have something that's ready to step into the permitting process. Something that in two, three — at the outside, four years — could be in production. And, therefore, it could be of real and immediate interest to a company like Dundee Precious Metals in terms of future feed for their plant.
And so I can't speak for Dundee but I have to assume that that was at least part of their interest in making an investment in Velocity. And as we move forward here, we might see some more interest from Dundee. We might see that situation developing.
Gerardo Del Real: You have approximately 184.5 million shares fully diluted. But I think it's important to note that the float is below 30%, right? Management's got significant skin-in-the-game.
I think you're just shy of 20% ownership there. You mentioned Artemis with the 32%; Dundee with the 8%. What's the market cap look like right now… and how's the treasury looking, Keith?
Keith Henderson: Oh, the treasury is great. We're fully-funded through 2021 exploration and beyond. So we have no immediate or even medium-term financing needs.
In terms of management shareholding, it's an interesting one. You're right, we've got about 18.5%, close to 19%, sitting with management. This is a very, very positive thing for shareholders, obviously. And it's a very positive thing for me every morning when I wake up. We're significant owners, and we will, obviously, continue to be. So I think our interests are extremely aligned with other shareholders — and that's good.
You're right, the float is incredibly small. You put management, and we have a significant shareholder out of the United States who's a close personal friend and business associate of mine who's got about 15%. We've got 10% sitting with Dundee, 32% with Artemis, and a couple of brokers in Vancouver who've got fairly significant positions sitting among themselves and their clients.
So yeah, you end up with this tiny float, which, maybe liquidity is not as spectacular as it might be… but, for sure, it's a stable stock. And we don't seem to be exposed to the negatives that float around in the market especially at times like these.
So there's a lot of potential for the stock to move with catalysts in the future such as significant intercepts; a new discovery at Iglika if we're lucky to get one; or any of our strategic shareholders, corporate shareholders, deciding that they want to take more of the company.
These are the kinds of things that will move a company like Velocity. And with so little float out there — these movements can be pretty interesting.
Gerardo Del Real: That's a very modest way… and I appreciate the modesty, by the way, Keith… but that's a very modest way of saying you present compelling value now as is. If gold never goes up another dollar, and if you never find another ounce — I think both of those will prove to be favorable for you.
I think gold does go up, and I think you do find more ounces. But again, I can see why Velocity makes sense for several companies at a significant premium to today's share price. And I want to leave it there.
Is there anything else that you'd like to add, Keith? Thank you so much for your time. You have catalysts; you have the treasury; you have the shareholders; you're in a stable jurisdiction — and it's gold. And I think it's a great time to be in gold.
Keith Henderson: Yeah. No, I agree. It is a great time to be in gold, and I have nothing in particular to add. Hopefully, we can speak again in the future. I think this is a good, relatively simple introduction to the company. And yeah, I look forward to speaking to you again sometime in the future.
Gerardo Del Real: I always say some of the best stories that I've made money on are the ones that are the simplest told and the simplest to execute on. I think you've done a brilliant job, thus far, and it'll be interesting to watch here in the coming quarters and years. Thank you so much for your time, Keith.
Keith Henderson: That's great. Thanks very much indeed. Take care, bye.Click here to see more from Velocity Minerals